What Happens Next After 900 Point Rally

Bulls: Treasuries will do everything they can to jump-start bank lending. The government is now providing capital to and insuring the debt of these banks, so their solvency is no longer in question. This means we have bottomed and up we go.

Bears: We have a long way to go from the bottom, this was just dead cat bounce. This cash injection is not enough to solve the problem. By the way, just curious who is going to bail out the government ?

Bulls: Shorts will cover soon, as the fear to invest in banks fade way.

Bears: Shorts is not the reason market is falling. Hedge funds are liquidating since they realize this can go much much lower. Have you ever looked at the Volatility Index (VIX)

Bulls:
The dollar is rallying and oil is going down. This means Americans will pay less for gas and use the money elsewhere boosting the economy.

Bears: The dollar is in a trash. The dollar hasn’t collapsed because all other currencies were inflated in unison. That doesn’t make the dollar any stronger.

Bulls: The earnings were good. Look at IBM, Intel and Johnson & Johnson.

Bears: What about Bank of America, Research In Motion, Mosaic. Oh ya what about Pepsi ?

As a matter of fact, neither party know the answer. CNBC joker Jim Cramer keeps predicting market bottom every other day on his show. Finally he gave up and now changed his position saying the markets will keep falling. Well just after he said that, the next day we got 900 point rally. If you do the exact opposite of his call, its more likely you will be on the winning side.

No matter what anyone tells you, the only two things to trust in this stock market is

  1. The company earnings and
  2. Stock charts.

They never lie. Everything else is rigged/bogus. Dumbass analyst have got this wrong again and again. They have downgraded good stocks and upgraded lousy ones. Isn’t it strange that most analyst downgrade a stock after it has been already sold heavily and upgrade a stock after it has already made the huge upward move. Makes you wonder if they are pumping it either way so that their trader friends can maximize their profits and get out leaving retail investors holding the bag. Retail investors have been punked millions and millions of time by these analyst calls.

If I were to buy anything in this market, it would be rock solid companies like McDonald’s Corp, Walmart, Johnson & Johnson, Procter & Gamble, Intel, Google, IBM.

If I were to short anything I would stay away from banks for a while. With treasuries bailing every other bank, its simply not safe. However autos, airlines, retailers and food chain industries still provide good opportunities.

Make charts your best friend to ride this rough market and key an eye on the $VIX. Rising VIX values = rising investor fear.

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